Concern over 'unsustainable' social care savings

UK councils have achieved procurement efficiencies in adult social care according to auditors, but care home supplier Southern Cross said such efforts have contributed to its financial uncertainty.

The Audit Commission’s June report Improving value for money in adult social care, said local authorities have already taken action to make purchasing efficiencies by ensuring the same services continue to be offered at similar prices – so not taking inflation into account.

The report said 85 per cent of councils reported efficiencies from improved procurement during the financial year 2009/10 by asking adult social care providers to reduce costs by limiting inflation uplifts in the fees paid by local authorities and adopting cost reduction methods.

For example, Nottinghamshire County Council and the area’s Primary Care Trust made efficiencies by jointly commissioning an intermediate care service, and one particular pilot to develop specialist services for older people reduced the number of care home placements made - avoiding costs of more than £200,000.

Meanwhile, in its half-year results ended 31 March and published last month, Southern Cross, the UK’s largest elderly care home provider with 752 homes, reported a £310.9 million loss. It said: “The board has taken into account a decline in new local authority admissions, a lower than originally expected round of fee increases (and in some cases requests for decreases) from local authorities and as a consequence pressure on its current and future cash position.”

It said the downward pressure on average weekly fee rates paid by local authorities "are reducing the group’s profit margins, particularly as a large proportion of the group’s costs are subject to inflationary pressures.”

Southern Cross’ landlords have been asked by the care home to agree to a four month deferral of 30 per cent of its monthly cash rental payments from 1 June to 30 September while the company talks to councils and other stakeholders about how it will restructure its operations.

The Audit Commission’s report also said 58 per cent of councils had made efficiencies in 2009/10 either by renegotiating contracts, tendering for a new supplier or examining how they reviewed and checked contracts to ensure best value.

The report said better procurement, improved back office arrangements and a preference for community-based rather than residential care are some of the changes that local authorities have implemented to help them meet cost challenges. But it also said the pace and scale of change needed to increase if authorities want to release “material savings”.